Markets are pricing in a 75% chance of a Bank of England rate cut in March after data reveals a cooling labour market and slowing wage growth.

The era of "higher for longer" appears to be crumbling. Fresh data from the Office for National Statistics (ONS) has revealed that the UK's unemployment rate has climbed to 5.2%, its highest level in five years, signaling that the aggressive monetary tightening of the past two years is finally biting.

For Kenya, a rate cut in London is not just foreign news; it signals a potential easing of global financial conditions. A softer sterling and lower global yields could offer the Kenya Shilling (KES) breathing room and reduce the cost of servicing the country's Eurobond obligations.

The Data Dive

The numbers paint a clear picture of an economy losing steam. Wage growth, a key inflation driver that the Bank of England has been watching like a hawk, has slowed to 4.2%. This deceleration gives the central bank the cover it needs to pivot towards easing.

• Unemployment Rate: 5.2% (5-year high)
• Wage Growth: 4.2% (Slowest since 2024)
• Market Odds for March Cut: 75%

James Smith, a developed markets economist at ING, noted that the report keeps the Bank "firmly on track" for a March cut. "The weakness is heavily concentrated in consumer-facing industries," he observed, pointing to the lingering effects of payroll tax hikes.

Impact on East Africa

A rate cut in the UK is good news for Kenyan exporters. As borrowing costs fall in one of Kenya's largest export markets, consumer demand for horticultural products—flowers, vegetables, and tea—could stabilize. Furthermore, a dovish Bank of England often correlates with a "risk-on" sentiment in global markets, potentially driving foreign portfolio inflows back into the Nairobi Securities Exchange (NSE).

"The pivot is coming," noted one City analyst. "And emerging markets will be the first to feel the relief."